8 things financial planners tell their loved ones

What do those in the know advise their friends and family when it comes to personal finance? Three planners tell all to Dilvin Yasa.

1. Pay yourself first

Rather than save what little you have left over after you’ve paid your weekly bills, put a regular sum of money away the minute your pay hits your bank account, advises Susan Bryan, Principal of Seeds of Advice. “Not only does paying yourself first become a good habit which ultimately fosters a sense of self-worth and self-love, it also means you can’t tell yourself ‘I’ll catch up next month’ and slip behind on your planning for the future.”

2. Always retain your financial independence

It’s easy to fall into the trap of relying on your partner for income when you’re at home with young children, but Siobhan Sellick, director of Prosperity Advisors Group says women should always maintain a level of financial independence. “It’s important to build some assets which are yours alone — not just in case something happens to your relationship, but to give you options and help you feel empowered,” she says. Aim to have a bank account in your name where you transfer funds on a regular basis, as well as a credit card (in your name only) as well as a few assets if you can.

3. Remain focused on your superannuation

Saving for your retirement doesn’t sound very sexy when you’re young and fit, but according to the Association of Superannuation Funds of Australia’s Retirement Standard, the average person will need at least $545,000 in retirement savings to be able to retire in a manner which doesn’t necessitate a can of beans for dinner every night. To help you get on your way, Laura Menschik, director of WLM Financial Services, recommends maximising the superannuation rules by topping up your fund with extra contributions — both concessional and non-concessional. “The tax-efficient environment of super, and the regular extra contributions will help towards your retirement goals.”

4. Set up (and maintain) an emergency fund

Putting aside extra cash to pay off your debts? Ease off a little and put half of said funds into an ‘emergencies only’ bank account which can’t be easily accessed, recommends Bryant. “Ideally you want to have at least three months’ salary in the account, but start with saving $1000 and then keep adding as you can.” Having an emergency fund buys thinking time when the unexpected happens, meaning you can often make better decisions moving forward. “It basically stops management by crisis,” adds Bryant.

5. Never agree to a 'gentleman’s agreement'

If you’re providing financial assistance to a close friend or family member, only ever do so on a proper, documented loan basis, advises Menschik. “This way, should that person experience financial distress such as bankruptcy or a family law suit, you should be able to call on your loan before the creditor or court,” she says. This also means you will then have the ability to re-loan that amount once more in the future.

6. Be responsible to those you love

No one likes to think about what will happen after the final curtain call, but if you’re responsible for a family, it’s important not to leave a mess behind, says Bryant. “I always recommend people have a will in place, an enduring power of attorney, and life insurance so that you can take the burden of dealing with your estate away from your loved ones at what would be a difficult time for them.” Adding income protection to the list means you can still afford your life if you become ill and are unable to earn an income.

7. Remain involved in family financial matters

As tempting as it is to let your partner deal with the household financials, taking your eye off the bottom line is not advisable, warns Sellick, who adds that everyone should at least understand the ins and outs of running a household, and more importantly, what your assets and liabilities are. “Not only do you not want to wait for a divorce, death or some other financial mishap to understand what your financial situation is,” she says. “But when it comes to planning together for your future, two heads are always better than one.”

8. Use your mortgage to your advantage

Rather than keeping your bank accounts separate to your mortgage, speak to your provider about creating an off-set account which will help you reduce the amount of interest you ultimately pay, recommends Menschik. “Just make sure you have a withdrawal facility should you require some funds for unforeseen circumstances,” she says.